Endogenous Coordination: Multinational Companies and the Production of Collective Goods in Central and Eastern Europe

36 Pages Posted: 2 Aug 2011

See all articles by Bob Hancke

Bob Hancke

London School of Economics & Political Science (LSE)

Date Written: August 2, 2011

Abstract

Most accounts of business coordination assume historically given conditions for this to emerge. Business coordination is therefore difficult, perhaps impossible, to construct endogenously. This paper examines a process of 'endogenous coordination' through an analysis of reindustrialization and industrial upgrading in Central Europe during the 2000s. Because of its recent post-communist history, during which existing institutions of economic governance were dismantled wholesale, Central Europe is a particularly unlikely place for complex forms of business coordination to emerge. Demonstrating the empirical possibility of endogenous coordination, and identifying conditions under which it has emerged thus shifts the debate from pessimistic fatalism to a more optimistic world of possibility. The paper identifies three conditions for business coordination to emerge. One, a pattern of industrialization that combines sophisticated skills and capital goods, leading to higher asset specificity and fixed costs; two, bottlenecks in the production of collective goods associated with these assets against the background of potentially high returns in investment; and, three, the existence of a third party, which provides a forum for deliberation and strategic coordination while holding effective sanctioning capacity.

JEL Classification: Z00

Suggested Citation

Hancke, Robert, Endogenous Coordination: Multinational Companies and the Production of Collective Goods in Central and Eastern Europe (August 2, 2011). LEQS Paper No. 41, Available at SSRN: https://ssrn.com/abstract=1903835 or http://dx.doi.org/10.2139/ssrn.1903835

Robert Hancke (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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